1. 1.

Banki ng l aw
2. 2.  Reserve Bank Of India Act 1934 Banking Regulations Act 1949  Legislations Banki
ng Law
3. 3. Contracting for public and private loans and negotiating and issuing the same
Continued……………. Acting as agents for government or local authority or any other
person or persons Borrowing, lending or advance of money, dealing in bills of exchange,
hundis promissory notes ….. Permitted business of Banking Section 5(b)defines banking
as accepting for the purpose of lending or investing of deposits of money from the public
repayable on demand, and withdrawal by cheque, draft or order  Banking Regulations Act
1949 Banki ng Law
4. 4.  Any other form of business as specified by the government in the Official Gazette
Selling, improving, managing, developing, exchanging, leasing, mortgaging or dealing with
any or all maters of the property or compampany  Undertaking the administration of estates
as executor trustee or otherwise  Undertaking and executing trusts  Carrying on and
transacting every kind of guarantee and indemnity business  Dealing with issues of shares,
loans , debentures etc for any company Banki ng Law
5. 5.  No banking company shall directly or indirectly deal in the buying or selling or bartering of
goods except in connection with the realization of security given to or held by it. Business
prohibited for Banks Banki ng Law
6. 6.  That the company has adequate capital structure and earning prospects continued
………………… That he proposed management will not be prejudicial to the public interest
or to the interest of its depositors  That the company is in a position to pay its present or
future depositors in full as teir claims accrue  Section 22 specifies that RBI will issue
license to a banking company after inspecting the books of the banking company and
satisfaction of the following conditions  Licensing of Banking Companies Banki ng Law
7. 7. Fails to comply any of the conditions imposed on it under subsection(1), 3,3(A) Section 23
deals with opening of branchesIf the company ceases to carry on banking business in India
 The RBI can cancel the license of the bank if it finds Banki ng Law
8. 8.  Any individual in respect of whom any of the directors is partner or guarantor Any firm in
which any director is interested as partner, guarantor or employee  Any of its directors 
Enter into any commitment for granting any loan or advance to or on behalf of  Grant loans
and expenses on the security of its own shares  Section 20 (notwithstanding anything to
the contrary in section 77 of the companies act 1956 ) no company shall  Restrictions on
loans and advances Banki ng Law
9. 9.  Any other matter the knowledge and experience of which in the opinion of the RBI be
useful to the banking company Small-scale industry  Law  Finance  Economics  Co-
operation  Agriculture or rural economy  Accountancy  Shall have special knowledge of
one of the following  Section 10 prohibits employment of managing agents Section 10(a)
specifies that 51% of directors in any board of directors of banking companies shall satisfy
the following conditions:  Management of Banking Companies Banki ng Law
10. 10. Be proprietors of any trading, commercial or industrial concern, not being a smaAny
firm which carries on any trade, commerce or industry which in either case is not a small-
scale industrial concern Any company not registered under section 25 Shall not have
substantial interest in, or be connected with, whether as employee, manager or managing
agent : Banki ng Law ll-scale industrial concern
11. 11. It will be deemed that such an individual be elected by the banking company Remove a
director and appoint a person of its choice  Instruct to reconstruct the composition of the
board  If the above criteria is not met RBI may Banki ng Law
12. 12.  Section 16 any person who is already director of a banking company is barred from
directorship in any other banking company Directors appointed by the RBI are exempt from
 this rule Once removed from his office cannot be reappointed for next 14 years  Cannot
hold office for more than eight years  Subsection 2(a) states that a director Banki ng Law
13. 13. Promotional bankingSupervisory control of banks Central Banking  Performs the
function of  Was nationalized in 1948  Established April1,1935 under Reseve Bank of
India Act 1934  Central bank of India  Reserve Bank Of India Act 1934 Banki ng Law
14. 14.  Advising government on floating of loans and legislation affecting banking continued
……………… Providing advances to the government for 90 days  Managing public debt 
Receiving and making payments  Maintaining cash balance  Banker to the central and
state governments transacts business by  Banker to Government  Required to maintain
gold and foreign exchange reserves in the form of minimum reserve systems  Issues and
regulates banknotes of all denominations through a separate issues department  Issue of
Currency  Central Banking Function Banki ng Law
15. 15.  Rate of interest continued ………. Margin  The purpose  Section 21 RBI can control
the advances against commodities under Selective Credit Control Mechanism it can stipulate
the  Supervision of banks : the RBI has statutory power to regulate the credit generated by
banks  Obtain financial accommodation by rediscounting their bills of exchange 
Scheduled banks can borrow from RBI on basis of eligible securities  Bankers and lenders
of last resort Banki ng Law
16. 16. Investment in government securitiesBalance in current account with India Cash in
hand (India) RBI can impound bank reserves to maintain the liquidity of assets in the form
of statutory liquidity ratio, the following assets are taken into account  The volume of credit
is normally controlled through the regulatory instruments of bank rate, open market
operations and variable cash reserve requirements. Control over bank rate is liberalized.
However it remains a bench mark in the fluctuating interest rate regime. Bank rate is the rate
of interest at which the RBI rediscounts bills of exchange Banki ng Law